No plans to lower VAT on energy bills despite Brexit promises says Treasury

Broken Promise?

Would a VAT cut actually help consumers with their energy bills?

A VAT rate would help consumers struggling to pay their energy bills. VAT is charged at 5% on energy bills for both electricity and gas so its scrapping would reduce costs.

Businesses too would benefit as currently they are charged at a rate of 20% although some businesses get a reduced rate of 5% if they are small and use less than the de minimis threshold.  

The Treasury may be holding off on making changes to the VAT rate due to the massive economic strain caused by the Covid-19 pandemic and the costs associated with the government's drive to hit NetZero emissions targets.

Economists forecast that to hit the governments environmental targets; it will cost hundreds of millions of pounds with some even predicting it could cost a trillion pounds.

Also read: Ministers urged to do more as requests for energy bill assistance soar

Would Energy Suppliers benefit from no VAT?

Any change to the VAT rate on gas and electric would create short term disruption and expense to suppliers. They would need to ensure their billing system is set up correctly to provide accurate energy bills to their customers. However, in the long run, VAT's scrapping could make the energy billing process easier for suppliers and consumers alike. 

Using a CRM can help

Most Customer Relationship Management (CRM) systems can handle the implementation of VAT rate changes. Still, some can make the process far trickier than it needs to be, and some even have VAT rates hardcoded into them and aren't configurable.

Dyball's CRM has an entire section designed to make the process of implementing VAT rate changes quick and easy by allowing an energy supplier to apply the VAT change to the appropriate date ranges.

Our CRM supports both electricity and gas supplies through the same interface, making rate changes even more straightforward. This is done through our gas and electricity data flow management systems, GASMAN and REGMAN. They provide UK energy suppliers with data views and functionality, traditionally driven by market messaging systems. 

For more information about our CRM, get in touch with us today.

The Treasury may have dismissed a VAT reduction or scrappage for now, but that doesn't mean that it won't change its mind in the future. The government will be keen to show the benefits of Brexit to businesses and consumers alike, so the possibility of VAT being lowered or removed should not be ruled out entirely. 

Further Reading

British Gas recorded a 15% decline in electricity demand among UK business due to Covid 19 and more strike action on the way

Consumer complaints about Energy Billing rose in Q3 of 2020 says new Ofgem report

Ofgem considering Energy Bill hike to help ease pressure on Energy Suppliers

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